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Title: Measuring Euro Area Monetary Policy

Author(s): Carlo Altavilla, Luca Brugnolini, Refet S. Gürkaynak, Roberto Motto and Giuseppe Ragusa

Publication Date: May 2019

Keyword(s): Asymmetry, ECB policy surprise, Event-Study, intraday and Persistence

Programme Area(s): Financial Economics, International Macroeconomics and Finance and Monetary Economics and Fluctuations

Abstract: We map ECB policy communication into yield curve changes and study the information flow on policy dates. A byproduct is the publicly available Euro Area Monetary Policy Event- Study Database (EA-MPD), containing intraday asset price changes. We find that Policy Target, Forward Guidance and Quantitative Easing factors capture about all the variation in the yield curve, with different factors appearing in the windows covering the policy decision announcement and the press conference, and having time-varying variance shares. We study sovereign yields, exchange rates, stock prices, persistence of effects and response asymmetry. Our methodology can be implemented for any policy-related event.

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Bibliographic Reference

Altavilla, C, Brugnolini, L, Gürkaynak, R, Motto, R and Ragusa, G. 2019. 'Measuring Euro Area Monetary Policy'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=13759